Consumer watchdog seeks more ease in mortgage disclosures
NEW YORK – A federal consumer watchdog is taking steps to make it easier to comparison shop for a mortgage.
The Consumer Financial Protection Bureau launched its “Know Before You Owe” project last week. It’s asking for the public’s feedback on how to simplify the paperwork borrowers receive when applying for a home loan. The bureau unveiled two prototypes of a new form that will eventually replace the current required disclosures.
The bureau will begin testing the forms to determine which is easier to understand; it also wants suggestions on how to further clarify the expenses associated with a mortgage. The goal is to make it easier for borrowers to compare loan terms for what could be the biggest financial commitment of their lives.
Beyond the interest rates marketed to borrowers, the cost of a mortgage is affected by several factors such as adjusting rates and underwriting and settlement fees. Critics say improved disclosures could have helped prevent many of the past problems surrounding the subprime mortgage crisis.
Currently, borrowers are entitled to receive two forms within three days after applying for a mortgage — a two-page Truth in Lending form and a three-page Good Faith Estimate. The latter form was revamped last year; a new regulation also required that the final costs can’t vary more than 10 percent from the estimates quoted.
The two prototype forms both itemize key costs on the first page, including the total closing costs, monthly payments and projected monthly payments in future years. Both versions provide more details and explanation of the loan terms on the second pages.
The bureau said it will make revisions through September before a single form is selected and refined. Other forms and disclosures borrowers are given later on in the loan process may also be tweaked. All new proposed forms will be issued by July 2012.
To review the sample forms and suggest feedback, consumers can go to www.consumerfinance.gov/ knowbeforeyouowe.